Posts Tagged ‘social performance’

Steve Wright is Director of Grameen Foundation’s Social Performance Management Center. He is a keynote speaker for the upcoming SOCAP11 conference. This is the first of a series of blog posts focusing on the intersection of money and meaning. We’ve excerpted a section of the post below, with a link to the full post afterwards.

Recently, a lot of great thinking has happened around the idea that business – and by extension the economy – should return value, in addition to generating profit. For example, Mark Kramer and Michael Porter wrote a very interesting piece on creating shared value that was also discussed in this New York Times article, “First make money. Also, do good.” Nestle Corporation is one of a growing number of companies that see shared value as an evolved form of corporate social responsibility. Customer capitalism (which focuses on providing value to the customer before the shareholder) is described in the Harvard Business Review as the third stage in the evolution of capitalism. (Professional management and shareholder capitalism are the first two.) And Umair Haque’s book, the New Capitalist Manifesto, describes “thick or authentic value” as the subtraction of total or real cost from the price a product can demand.

This is a good thing; however, it is still within a largely amoral paradigm, where the mythology centers on the primacy of profit while – potentially, maybe, hopefully – “doing good”. This can also be seen in how we (social enterprises and investors) use the words “sustainable” and “profitable” interchangeably, depending on who we are talking to. “Sustainable” implies a primary focus on doing good, while “profitable” implies a focus on profit.

My intent here is to make arguments that err on the side of doing good, arguing that we should focus on meaning before money.

Grameen Foundation has been working for 14 years to advance a certain approach to microfinance – one that is rooted in the experiences, achievements and philosophy of Grameen Bank. Though we do not promote any particular methodology (i.e., a certain means of providing financial or human development services to the poor), we do focus on and try to advance a set of principles and standards. Methodologies are very context-specific, while principles endure and standards are universal. (We approach our technology-for-development work similarly, but that is beyond the scope of this short post.)

Some of the principles are not particularly controversial or microfinance-specific – things like a commitment to transparency, innovation, being client-centered, investing in the human capital of employees, promoting gender equality and so on. Others are specific to microfinance, such as bundling financial and human development services wherever possible, measuring and managing social performance on par with financial performance, mobilizing loan capital locally (through savings or local currency borrowings), and local (or indigenous) ownership and governance. Among the latter, there are some thoughtful people in our movement (or industry, as some prefer to call it) who would disagree with the wisdom of these principles. I say that to emphasize that these are not meaningless slogans that everyone agrees on.

Talking about principles and standards, and about our work to champion innovation that spreads them throughout the microfinance sector, can seem abstract at times, even though we are clearer than ever that this is how Grameen Foundation can have the greatest impact. Sometimes we find it helpful to focus on individual organizations that embody these principles and meet these standards, however imperfectly, to deepen our own understanding of how microfinance can evolve, and also further the understanding of people who support our organization in various ways. With microfinance coming under increasing scrutiny by regulators, the media and politicians, holding up pace-setting institutions is an important part of educating stakeholders about what microfinance can be, and arguably should be.

During his recent trip to Haiti, Alex met extensively with the borrowers and staff of Fonkoze, including founder Father Joseph Philippe (left).

With my second sabbatical approaching (at Grameen Foundation we get one every seven years), I decided to pick one such organization and write a book about it for a general audience. It was not that hard to decide which one – I chose Fonkoze, Haiti’s largest MFI. It is a dynamic, innovative, risk-taking organization led by fascinating people – mostly Haitians and Haitian-Americans, but also a few Americans and Europeans – in a country that has been in the news in recently (for all the wrong reasons, unfortunately). It has also been a beneficiary of Grameen Foundation’s products and services for more than a decade.

I began my sabbatical on June 16 and a few days later was down in Haiti – my fifth and longest trip yet to that sad and surprising country. Shortly before going, I began a blog that would chronicle the process of researching and writing the book, and invited people around the world to participate in the creative process. I have been posting short written reflections, photos and videos (most under two minutes) ever since.

My goals for this project are aggressive. I want it to be a New York Times best-seller! (Why the heck not?) I also want it to generate significant new partners and funders for Grameen Foundation, Fonkoze and organizations that operate along similar lines. (All the royalties from the book will go to Grameen Foundation.) And I want it to change the narrative in the mainstream media from simplistic answers to the “what’s wrong with microfinance” question to more interesting analyses of how it is evolving in some places to be an even more potent poverty-fighting strategy than earlier models. I plan to have the book in stores by the third anniversary of the Haiti earthquake (January 12, 2013).

Ambitious? Yes! But with new “friends” of this project coming forward every day – consider yourself invited! – it just might be achievable.

Grameen Foundation founder, President and CEO Alex Counts is in the beginning phase of working on a new book on microfinance in Haiti, focusing in particular on the country’s best-known microfinance institution, Fonkoze.

Alex is in Haiti now, conducting research and working closely with Fonkoze staff and meeting with borrowers to find out more about what’s working, what’s not, and the organization’s overall impact on the poor. You can follow along with Alex’s progress at his blog, where he is posting updates on his activities, including videos and drafts from his book. As Alex says, “I hope lots of people will take interest in this project, check out the postings and comment on them, so I can improve my thinking and writing, and even repost/circulate what I post to draw in others.”

Alex Counts (right) with Fonkoze borrowers in Haiti.

All proceeds from the book, which Alex expects to publish in early 2013, will benefit Grameen Foundation and our efforts to empower the poor through access to small loans, valuable information and unique business opportunities. Alex has also set up a Facebook page for the book, which we encourage you to “like” and follow!

Steve Wright is Director of the Social Performance Management Center at Grameen Foundation.

The team at the Grameen Foundation Social Performance Management Center (SPMC) is trying to solve a problem fundamental to poverty alleviation: how to accurately measure who is reaching the poor and to what extent. The Progress out of Poverty Index® (PPI®) is the necessary first step toward addressing those questions. An easy-to-use tool, it enables microfinance institutions (MFIs) to obtain consistent, measurable and reliable data, as well as giving them the ability to use the results to improve their services to the poor. The PPI is currently the industry-standard poverty measurement tool used by MFIs globally.

Over the last four years, Grameen Foundation staff has heard from MFIs, as well as from MFI networks and associations, that they need to integrate PPI data with their management information systems to gain critical business intelligence (for example, to learn how a particular loan product is performing at a particular level). We have worked closely with these organizations to understand their requirements and prototype the tools that they need.

Today, we’re delighted to announce that we will be creating a PPI management tool that users will access via the Internet. This new, cloud-based PPI application – made possible by generous funding from The Moody’s Foundation and built on the Force.com platform from Salesforce.com – will make the PPI even more dynamic and easier to use, enabling more organizations to use it to collect, analyze and report social performance data.

In addition to our commitment to excellence in social-performance management by microfinance institutions, exemplified by our championing of the Progress out of Poverty Index™, Grameen Foundation has long been committed to promoting a fuller understanding of research into the effectiveness of microfinance as a poverty-reduction strategy. We have published two reports, one by Professor Kathleen Odell of Dominican University in 2010 and an earlier one by Nathanael Goldberg (who is now with Innovations for Poverty Action), that attempted to summarize in simple terms what the evidence could tell us. (Though Grameen Foundation commissioned both reports, we exerted no editorial control over what either Odell or Goldberg wrote.) Both reports were well-received by practitioners, researchers, investors and policymakers alike. David Roodman, a leading blogger in the microfinance industry, wrote that Prof. Odell did “a fantastic job” with her report, adding, “I applaud the Grameen Foundation for giving her such autonomy. The report reviews a good set of relevant studies. With concision and clarity, yet without jargon, it explains the pros and cons of various research methods, and the limitations of them all. And it draws balanced judgments. It is a model of public communication about social science research.”

"Measuring the Impact of Microfinance: Taking Another Look" is the latest report published by Grameen Foundation that examines the studies of the effectiveness of microfinance as a tool to alleviate poverty.

One of the most confusing and contentious issues covered in both reports is the controversy regarding the well-known Pitt/Khandker studies on the impact of three major microfinance institutions in Bangladesh, including Grameen Bank. In general, their research found many positive, statistically significant impacts on clients when measured against comparison groups. Despite being one of the few microfinance impact-assessment research studies that has undergone a rigorous peer-review process prior to its publication in an academic journal (the Journal of Political Economy), it has been criticized as being flawed and unreplicable by other researchers using the same data. These criticisms have been leveled by NYU Professor Jonathan Morduch (a respected researcher) and Roodman (microfinance’s most widely read and respected blogger). Though I lack a deep understanding of econometrics (on which the Pitt/Khandker study relies), I have probed into this debate, as Odell and Goldberg did in their papers. Interestingly, I was alerted last year that an article that was supposed to conclusively prove that the Pitt/Khandker study was wrong was itself rejected from a peer-reviewed journal. It may still be published, though.

Most recently, Professor Pitt has published a detailed response to the criticisms of his original research with Khandker. He claims that Morduch and Roodman made errors of their own in their analysis of his data, and when those errors are corrected, the original findings stand up. The paper’s abstract states, “This response to Roodman and Mordoch seeks to correct the substantial damage that their claims have caused to the reputation of microfinance as a means of alleviating poverty by providing a detailed explanation of why their replication of Pitt and Khandker (1998) is incorrect. Using the dataset constructed by Pitt and Khandker, as well as the data set Roodman and Morduch constructed themselves, the Pitt and Khandker results standup extremely well, indeed are strengthened … after correcting for Morduch and Roodman errors.” Roodman has just published a preliminary response on his blog.

What are the main takeaways at this point? First, in the world of social-science research, things are not always as they appear. Individual studies should be taken with a grain of salt, as all have their strengths and limitations. More than ever, I think the safest course is to reflect on more than two decades of research using experimental, quasi-experimental and non-experimental designs, as well as personal observations (for those of us who have spent time with microfinance clients) and qualitative research, such as that found in Portfolios of the Poor, a terrific book co-authored by Professor Morduch, and my book, Small Loans, Big Dreams. Objective efforts to demystify research findings, such as the Odell and Goldberg reports and another solid treatment by Freedom From Hunger President Chris Dunford, should be reviewed by microfinance practitioners, investors and volunteers.

Finally, there is no “gold standard” in research, but rather a growing body of evidence that microfinance is an incomplete but improving strategy to address global poverty – one that can be made more effective by refining it based on available research, as well as by having regular feedback loops involving social-performance data that Grameen Foundation will continue to ensure becomes a part of our industry’s DNA.

We’re very excited to help spread the word that the MIX has just recently updated its online platform to display social performance data for MFIs along with its financial performance information. We commend the MIX for its efforts and are pleased to see that it continues to innovate and promote effective double-bottom line practices. MFIs using the PPI and reporting to the MIX are integrated into this new display and in the coming months we hope to announce how the MIX will indicate PPI Certified institutions in the new display.

Read more about the exciting new developments at MIX concerning social performance management visit MIX’s Social Performance Resource Center:

Kathleen Odell is an assistant professor of economics at Dominican University’s Brennan School of Business. Her new paper examines major microfinance studies conducted since 2005 and is a follow-up to a 2005 Grameen Foundation report by Nathanael Goldberg which examined studies conducted between 1970 and 2005.

The title of the lunch-hour event was “Does microfinance reduce poverty? A debate on the social impact of microfinance as a development tool.” In the invitation, the “debate” was outlined as follows:

Microcredit has been successful in increasing access to capital by the poor but does it actually reduce poverty for the people it intends to help? Join us for a discussion on the effect of microfinance on the lives of poor people. Hear leading experts examine the value of microcredit as a tool for fighting poverty.

By the end of the hour, a few things were clear. The most obvious conclusion was that 60 minutes wasn’t nearly enough time to come to any resolution on the question at hand (Does microfinance reduce poverty?) – it was barely enough time to outline the question itself. Having spent the last six months engrossed in the literature on the social impact of microfinance, I anticipated that the discussion might center on some of the latest impact assessment research, upcoming studies, unanswered questions, and possibly the surprisingly incendiary debate about the merits and disadvantages of various impact assessment methodologies. In fact, the panel discussion, and the questions that followed, was largely concerned with the relationship of microloan interest rates, profits, and social impact. Given the venue and the audience, this turn really isn’t surprising.

When you read about organizations that help the poor, do you wonder how they know they are making a difference? We’re seeing positive results in Haiti, the poorest country in the Western Hemisphere. Fonkoze, the largest microfinance institution (MFI) in Haiti, is demonstrating that their programs help clients move out of poverty.